Monday, May 14, 2012

Vague allegations can't plead around first sale

BPI, which makes supplements, sued Scalini and others,
including Allstarhealth.com, for violating the Lanham Act and coordinate
Florida laws.BPI alleged that
Allstarhealth misrepresented itself as an authorized BPI agent.Because the products defendants sell aren’t
inspected by BPI, BPI alleged that the products aren’t genuine.BPI further alleged that defendants were
selling its products at “excessively discounted prices” (50% below
retail).

First sale doesn’t apply if there are material differences
in the products, and the threshold for materiality is low.But that doesn’t mean that you can ignore the
pleading standard.As to the authorized
dealer allegations, the complaint didn’t properly allege that claim.A printout from the website was attached to
the complaint, and, rather than supporting the claim of authorization, it only
showed that defendants sold BPI products; the court could consider this as it
was incorporated in the complaint.The
mere allegation of misrepresentations of authorized status couldn’t support the
infringement claim, given that when a purchaser simply resells a product and
does nothing more there can be no actionable misrepresentation.Other cases accepting authorization-based
claims involved additional conduct like metatags (sigh) or incorporation of the
mark into domain names.

Like me, the court also believed that an allegation of
too-low prices doesn’t state a claim for infringement.First sale means that the seller can’t
control the product once it’s out the door.

Finally, the quality control allegations were insufficient
for failure to allege (1) what BPI’s quality control measures were and (2) how
the products sold by defendants failed to comply wiht these quality control
measures. As other cases have held,
“quality control” is not “a talisman the mere utterance of which entitles the
trademark owner to judgment.”

Boldly (and, I think, unwisely), BPI alleged federal
dilution.BPI unsurprisingly failed to
allege sufficient facts establishing true fame; this claim was dismissed with
prejudice, but I hope there’s the prospect of a fee award if BPI tries
again.BPI also failed to allege that
defendants started use after the mark became famous, and it also failed to
allege facts supporting either blurring or tarnishment.BPI alleged that sales at deeply discounted
prices “diluted the value of the BPI Mark and diminished BPI's reputation as a
provider of reliable, high quality, cutting edge products.” Reselling genuine products at a discount can’t
be dilution by tarnishment, though the court did cite a 2003 case holding that
a complaint stated a tarnishment claim when it alleged that the defendant
distributed genuine goods with an inferior warranty, which I think is also
wrong.BPI didn’t state a claim for
dilution by blurring because it didn’t allege that defendants used the mark to
sell unrelated goods or services.Selling the genuine article can’t create associations with unrelated
goods.Everything was dismissed with
leave to amend.

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